Incentive structure for centralized trading market

Abstract

An automated marketplace is separated into tiers, with behavioral requirements for each tier. Tier eligibility is a “structural incentive” for market participants to exhibit desirable behavior and eschew undesirable behavior. Tiered eligibility also reflects the natural imbalance of liquidity in the market and the need to preserve the identity of a class of liquidity providers, which further leads to a structure that can preserve the integrity of person-to-person trading relationships even in an automated environment. Within each tier, participant behavior leads to a ranking for that participant. When specific events occur, these events are allocated based on participant ranking. Participant ranking is an “activity incentive” that influences the behavior of market participants. Certain events are defined as desirable or undesirable, and when performed by a market participant, lead to positive incentives or negative incentives, of structural and/or monetary type.

1 . A method of allocating an event from an initiator to counterparties using a stock loan trading system, comprising:
 automatically determining, by a computer program executing at the stock loan trading system, a ranked sequence of the counterparties, based on activities of the counterparties during a first predetermined time period,   receiving, by the computer program executing at the stock loan trading system, the event from the initiator,   allocating, by the computer program executing at the stock loan trading system, the event according to the ranked counterparties sequence, and   moving, by the computer program executing at the stock loan trading system, counterparties that participated in the event to the end of the ranked counterparties sequence.   
     
     
         2 . The method of  claim 1 , wherein the event is a stock return, the initiator is a borrower and the counterparties are lenders. 
     
     
         3 . The method of  claim 1 , wherein the event is a stock recall, the initiator is a lender and the counterparties are borrowers. 
     
     
         4 . The method of  claim 1 , wherein the activities are one of loan durations, loan values, and share quantity in the loans. 
     
     
         5 . The method of  claim 4 ,
 wherein each of the activities is compared, by the computer program executing at the stock loan trading system, with a low threshold, and   wherein an activity that is under the low threshold increases a frequency of the corresponding one of the counterparties' representation in the ranked counterparties sequence.   
     
     
         6 . The method of  claim 1 , further comprising:
 determining whether the initiator is eligible for a financial incentive, and when the determination is positive, assigning, by the computer program executing at the stock loan trading system, the financial incentive to the initiator.